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Father Not Allowed to Claim the Kids on His Taxes

A U.S. Tax Court has ruled that where Mother was given temporary sole possession of the parties’ family home during the pendency of the divorce case, but Father was awarded family home in the divorce judgment three years later, Father’s absence from family home was not temporary for purpose of the dependency exemption. In the case of Alarcon v. Commissioner, Texas resident, Father, separated from his wife, Mother. He then moved in with his parents, while Mother remained in the family home with their two children.

On December 6, 2006, Texas Trial Court awarded Mother temporary possession of the family home, but granted Mother and Father the temporary joint custody of the children. During 2007, the children lived mostly with Mother in the family home. On March 9, 2010, Texas Trial Court issued the parties’ final divorce judgment, which, among other things, awarded the family home to Father. When Father filed his federal income tax return for the tax year 2007, he claimed head of household filing status, dependency exemptions for the children, and the child tax credits for the children. However, Mother also claimed dependency exemptions for the children. Father did not attach I.R.S. Form 8332 [release of exemptions] or its equivalent to his tax return.

On February 16, 2010, I.R.S. sent deficiency notice to Father for the tax year 2007, informing him that it disallowed his dependency exemptions and child tax credits, and changed his filing status from head of household to single, all of which resulted in a tax deficiency of $3,631. Father filed a timely petition for relief with the Tax Court, which he followed up with amended petition per the Tax Court order. Father contended that he should be able to claim head of household filing status and dependency exemptions for the children because he paid all costs of maintaining the family home during 2007, considered family home his home, and was away from the family home only temporarily because of Texas Trial Court order.

After trial, U.S. Tax Court rules in favor of I.R.S. Tax Court finds that (1) Father’s absence from family home due to the Texas Trial Court order was not temporary because the order precluded Father from living in the family home and family home was Mother’s and the children’s home during 2007; (2) Father’s prolonged absence from the family home could not be considered temporary even if it was "caused by his wife and her attorneys" and not through any fault of his; (3) Father cannot claim dependency exemptions for children because the children did not share his principal place of abode for more than one-half of 2007, and Mother did not sign I.R.S. Form 8332 release of exemptions; and (4) Father cannot claim head of household filing status or child tax credits because the children did not live with him for requisite time and were not his qualifying children.